Profitable investment return from strata-titled shop units

As there is limited supply of strata-titled shops, their prices have stayed resilient. Most buyers who have purchased such shops in the last 5 years have made profit on paper. They are also not affected by the recent property cooling policies.

Recent launches like Millage @ Changi and The Promenade @ Pelikat have attained remarkable take-up rates. So far, 669 strata shops were transacted in the first six months of 2012 far exceeding the 624 units over the whole of 2011.

These mixed development shops are usually well located, affordable and provide good human traffic from nearby housing estates and offices which were major attractions for the investors. As such these strata units in mixed projects overtook other units in malls for the resale and subsale market in the first half of 2012.

The resale prices have appreciated in tune with good demand. A shop unit at Southbank was launched at an average of $1,508 psf in 2006 and was resold at $2,295 psf in 2010.

In general, the capital appreciation for these shop units are achieving a 21.5% annual compounded ROI over the past five years.

In 2007, a 312 sq ft strata shop space at Bukit Timah Plaza was going for $300,000, or $961 psf. In Jun 2012, it was sold for $800,000 or $2,563 psf.

The average rental return for strata shops is from 3.5 to 6% as compared to 2 to 4% return for residential units currently.

In general, a buyer who have purchased a strata shop unit in the past 3 years may be able to expect at least 15% capital appreciation.

21 Jul 2012